‘Clunker program’ not as big of hit with recyclers

While Milwaukee-area automotive dealers give rave reviews to the “cash for clunkers” program for stimulating new-vehicle sales, the companies that are recycling thousands of the clunkers aren’t as upbeat.

The last day for consumers to receive a rebate of up to $4,500 for buying energy-efficient new vehicles and trading in their old “clunkers” was Aug. 24. However, many of the old vehicles are just now hitting the recycling yards because auto dealers are waiting until they receive their government checks before disposing of the trade-ins.

After dealers’ early concerns that they weren’t receiving their checks, 80 percent to 90 percent of rebate compensation has been paid, said Jim Tolkan, president of the Automobile Dealers Association of Mega Milwaukee. After they receive the checks, they have seven days to dump the clunkers via recyclers, he said.

Recyclers in the Milwaukee area said they are paying dealers $225 to $275 per vehicle. Recyclers drain any remaining environmentally-unfriendly fluids from the vehicles and crush them.

Jeff Rosen, executive manager of Rosen Nissan and Rosen Kia on South 27th Street at the Milwaukee-Greenfield border, said his dealerships sold about 300 vehicles through the “clunkers” program. Rosen called the program a success because “a lot of people who wouldn’t have bought anything” purchased new vehicles.

Recyclers started seeing an influx of clunkers within a week of the Car Allowance Rebate System (CARS) starting in July and expect the bulk of the vehicles to arrive by Oct. 1. The legislation requires that the trade-in vehicle be crushed or shredded so that it will not be resold.

Recyclers said they saw a slight uptick in vehicle recycling activity, but called the workload manageable.

Larry Erlich, vice president of Waukesha Iron & Metal, said his company added two employees. At Miller Compressing Co. in Milwaukee, employees worked an extra two hours on weekdays and on Saturdays, said Alan Jensen, vice president of ferrous sales.

“It’s definitely a good thing,” Erlich said of the impact on his company.

However, he said he is concerned the short-term surge in vehicle recycling will hurt the price of scrap steel the recyclers sell to steel mills and foundries.

Miller Compressing has purchased between 2,000 and 2,200 clunkers, which Jensen said is the equivalent to three or four days’ of the company’s normal intake.

“Any improvement is good — we appreciate it,” he said. “But it wasn’t that big.”

Before the recession, recyclers were processing 14 million to 15 million used vehicles per year, but the number was expected to drop to 10 million this year, said Bruce Savage of the Institute of Scrap Recycling Industries, Washington, D.C. CARS could boost that figure by 1.4 million to 1.5 million.

So far, the clunkers have had no impact on scrap prices, which are determined by global demand for steel, Savage said. Prices have risen from a low of $100 per ton in fall 2008 to about $250 a ton this week due to early signs of an economic recovery, he said.